USD/JPY extends sideways grind near 110

• 10-year US Treasury bond yield stays flat on Wednesday.
• Chicago Fed's National Activity Index points out to slowdown in economic growth.
• US Dollar Index drops below 97.50 mark in early American session.

The USD/JPY pair is having a difficult time finding direction on Wednesday as investors are waiting for the next significant catalyst. As of writing, the pair was up 0.08% on the day at 109.95.

USD weakens slightly on Wednesday

Earlier in the day, US President Donald Trump said that they will have to impose a 25% tariff on European car imports if they were to fail to reach a trade deal with the European Union. Although these comments weighed on European stock markets, the JPY struggled to find demand as a safe-haven. 

Regarding the Federal Reserve's monetary policy, Trump argued that the US GDP would expand by 4% if it weren't for the FOMC's interest rate decisions. Meanwhile, the data published by the Federal Reserve Bank of Chicago showed that the economic growth in December lost momentum with the National Activity Index slumping to -0.35 from 0.41 in November.

Although the US Dollar Index, which spent a large portion of the day moving sideways above the 97.50, edged lower and was last down 0.15% on the day at 97.45, it failed to help the pair break out of its tight daily channel. In the meantime, the 10-year US Treasury bond yield is staying flat on the day to allow the pair to stay confined in its range. 

In the early trading hours of the Asian session on Thursday, Trade Balance, All Industry Activity Index and Coincident Index from Japan will be looked upon for fresh impetus. On Friday, the Bank of Japan will be publishing the minutes of its January monetary policy meeting.

Technical levels to watch for